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    Prepare Cash Flow Statement for Nevada Estates

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    1. These are the following data from the accounting records of Nevada Estates:

    Depreciation Expense 15,900
    Payment of Income Taxes 24,500
    Collections of Accounts Receivable 167,200
    Purchase of Treasury Stock 40,000
    Declaration of Stock Dividend 65,000
    Loss on Sale of Plant Assets 8,400
    Collection of Dividend Revenue 13,800
    Payment of Salaries and Wages 83,600
    Cash Sales 103,700
    Net Income 61,200
    Acquisition of Land 73,500
    Payment of Interest 19,400
    Interest Received on Investments 3,100
    Issuance of Bonds Payable 500,000
    Increase in Accounts Payable 20,300
    Payments to Suppliers 173,600
    Acquisition of Equipment by Issuing 50,000
    Long-Term Note Payable ________

    a. Prepare the operating activities section of the statement of cash flows using the direct method.

    2. Comparative financial statement data of McDonalds follows:

    McDonalds
    Comparative Income Statement
    Years Ended Dec. 31, 2003 and 2002
    2003 2002
    Net Sales $462,000 $427,000
    Cost of Goods Sold 229,000 218,000
    Gross Profit 233,000 209,000
    Operating Expenses 136,000 134,000
    Income From Operations 97,000 75,000
    Interest Expense 11,000 12,000
    Income Before Income Tax 86,000 63,000
    Income Tax Expense 30,000 27,000
    Net Income $ 56,000 $ 36,000
    ======= ======
    McDonalds
    Comparative Balance Sheet
    Dec. 31, 2003 and 2002
    (Selected Amounts Given for Computation of Ratios)

    2003 2002 2001
    Current Assets:
    Cash $ 96,000 $ 97,000
    Current Receivables (Net) 112,000 116,000 $103,000
    Inventories 172,000 162,000 207,000
    Prepaid Expenses 16,000 7,000
    Total Current Assets 396,000 382,000
    Property, Plant, and Equipment (Net) 189,000 178,000
    Total Assets $585,000 $560,000 $598,000
    ======= =======
    Total Current Liabilities $206,000 $223,000
    Long-Term Liabilities 119,000 117,000
    Total Liabilities $325,000 $340,000
    Preferred Stockholders' Equity, 6%,
    $100 Par 100,000 100,000
    Common Stockholders' Equity, No-Par 160,000 120,000 90,000
    Total Liabilities and Stockholders' Equity $585,000 $560,000
    ======= =======
    Other Information

    A. Market price of McDonalds common stock: $49 on Dec. 31, 2003, and $32.50 on Dec. 31, 2002.

    B. Common shares outstanding: 10,000 during 2003 and 9,000 during 2002.

    C. All sales on credit.
    Required
    A. Compute the following ratios for 2003 and 2002:

    1. Current Ratio
    2. Inventory Turnover
    3. Accounts Receivable Turnover
    4. Times-Interest-Earned Ratio
    5. Return on Assets
    6. Return on Common Stockholders' Equity
    7. Earnings Per Share of Common Stock
    8. Price/Earnings Ratio
    9. Book Value Per Share of Common Stock

    B. Decide (a) whether Wahl's financial position improved or deteriorated during 2003, and (b) whether the investment attractiveness of its common stock appears to have increased or decreased.

    C. How will the information you learned in this problem help you evaluate
    an investment?

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    https://brainmass.com/business/statement-of-cash-flows/prepare-cash-flow-statement-nevada-estates-275151

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    Solution Preview

    1.
    These are the following data from the accounting records of Nevada Estates:
    Depreciation Expense 15,900
    Payment of Income Taxes 24,500
    Collections of Accounts Receivable 167,200
    Purchase of Treasury Stock 40,000
    Declaration of Stock Dividend 65,000
    Loss on Sale of Plant Assets 8,400
    Collection of Dividend Revenue 13,800
    Payment of Salaries and Wages 83,600
    Cash Sales 103,700
    Net Income 61,200
    Acquisition of Land 73,500
    Payment of Interest 19,400
    Interest Received on Investments 3,100
    Issuance of Bonds Payable 500,000
    Increase in Accounts Payable 20,300
    Payments to Suppliers 173,600
    Acquisition of Equipment by Issuing 50,000
    Long-Term Note Payable ________

    a. Prepare the operating activities section of the statement of cash flows using the direct method.

    Nevada Estates
    Statement of cash flows
    Collections of accounts receivable $167,200.00
    Payment of income taxes -$24,500.00
    Payment of salaries and wages -$83,600.00
    Payment of interest -$19,400.00
    Payment to suppliers -$173,600.00

    Net cash provided by operating activities -$133,900.00

    2.
    Comparative financial statement data of McDonalds follows:

    McDonalds
    Comparative Income Statement
    Years Ended Dec. 31, 2003 and 2002
    2003 2002
    Net Sales $462,000 $427,000
    Cost of Goods Sold 229,000 218,000
    Gross Profit 233,000 209,000
    Operating Expenses 136,000 134,000
    Income From Operations 97,000 75,000
    Interest Expense 11,000 12,000
    Income Before Income Tax 86,000 63,000
    Income Tax Expense 30,000 27,000
    Net Income $ 56,000 $ 36,000
    ======= ======

    McDonalds
    Comparative Balance Sheet
    Dec. 31, 2003 and 2002
    (Selected Amounts Given for Computation of Ratios)
    2003 2002 2001
    Current Assets:
    Cash $ 96,000 ...

    Solution Summary

    The expert prepares a cash flow statement for Nevada Estates. That ratios are also computed for McDonalds.

    $2.19